SUPER-SPLITTING
On 28 December 2002 changes to the Commonwealth Family Law Act 1975 (the “FLA”) were introduced that enabled superannuation to be treated as “property” and not just as a future “resource”.
The upshot of this is that married couples who have separated have been able to split their superannuation entitlements as part of the division of assets pursuant to the matrimonial property settlement.
Receiving superannuation as part of a matrimonial property settlement has significant taxation benefits to the receipt of other assets acquired pursuant to a matrimonial property settlement.
How May Superannuation be Split?
Superannuation splitting may be done by agreement between parties such as by way of a Superannuation Splitting Agreement certified by both parties lawyers, or may be drafted into the Family Law Consent Order that are made by the Family Court of Australia.
To implement a superannuation spilt, the applicable superannuation fund will need to be contacted and its approval to the proposed Superannuation Splitting Agreement or Consent Order would need to be obtained.
The Type of Superannuation Split
Georgiadis Lawyers can provide you with comprehensive legal advice regarding a proposed superannuation spilt and we will ensure any Consent Orders or other Superannuation Splitting Agreement complies with the applicable Superannuation Laws that are governed by a number of important Acts including the following:
What sort of Superannuation May Be Split Under the new Super Splitting Laws?
Most types of superannuation may be spilt under the applicable superannuation laws.
For instance, any superannuation benefits held by a party in an accumulation plan, a defined benefit plan or a hybrid plan are able to be split. Moreover, superannuation held in an approved deposit fund is also able to be split as are benefits held in a retirement savings account.
We advise that self managed superannuation funds also come under the auspices of the super splitting laws and are able to be successfully split, along with superannuation held in an account such as a superannuation holding accounts reserve.
However, we advise that superannuation held by a de facto couple is not covered and may not be split pursuant to the superannuation laws.
Why is superannuation Held by De facto Couples not covered?
The law governing the adjustment of property interests under the FLA is confined to persons who have been married. This is due to the current limitation imposed on the Commonwealth Government to only be able to make laws about marriage and the consequences of its breakdown.
The Commonwealth Government cannot presently make a law about what will happen in respect of a property settlement following the separation of a de facto couple.
Whilst the State Governments hold the power to confer this power upon the Commonwealth Government, to date State Governments have not chosen to exercise their discretion to confer this power on the Commonwealth Government.
What Types of Orders May be Made by the Family Court of Australia?
The Family Court of Australia is capable of making “flagging” or “splitting” Orders.
What is a flagging Order?
A flagging order is a direction to the trustee of a super fund to refrain from making a split superannuation payment without the leave of the Family Court of Australia.
What is a Splitting Order?
A splitting order is a direction to the trustee of a super fund to create a separate fund in the name of a spouse who has not contributed to the superannuation benefits accrued in the super fund.
If a Splitting Order is made we advise that generally all components of superannuation are split, including the lump sum pension component, the preserved and non-preserved components that all retain their character in the newly created super fund for the benefit of the spouse who has not contributed to the superannuation benefits accrued in the super fund.
Need Help Determining the Value of Your Superannuation?
Georgiadis Lawyers may assist you to value your superannuation for the purpose of a matrimonial property settlement. We can also assist you to determine how much of your superannuation was held by you prior to commencement of the relationship and how much your estranged spouse may be entitled to claim. Superannuation valuations often involve the application of complex formulae that are used to ascribe a value to superannuation interests. Depending on the type of fund (e.g. an accumulation fund or a defined benefit fund) the method of valuation will alter.
Superannuation Held in an Accumulation Fund
Superannuation funds that operate as an accumulation fund are similar to a savings account, with interest being accumulated as deposits in the account.
However, we caution all members of accumulated funds to obtain advice from us or suitable legal advisers and/or financial planners when entering into a superannuation split with respect to an accumulated fund as a percentage applies to any increase in the value of the account after the date of the split, which could arguably entitle an estranged spouse to benefit from an increase in value in the super fund subsequent to the matrimonial property settlement.
For accumulated amounts, we suggest it is far better to specify a base amount or to set a dollar figure and for the non-member to have that amount rolled into their separate account in a different fund.
We ensure your superannuation interests is properly valued and that a fair amount is provided to your estranged spouse and ensure that the trust deed that created the superannuation fund permits this type of superannuation split to occur.
